Top Tips: 15 Ways To Raise A Young Mogul

15 Ways To Raise A Young Mogul

Look for Signs

So your kid's only 3 years old--that doesn't mean it's too soon to spot talent, says Ann Helmus, a Newton, Mass.-based clinical neuropsychologist who works with children and adolescents. According to Dr. Helmus, "Kids who are particularly independent, creative and show a knack for problem-solving are the best candidates for young entrepreneurship." Bill Johnson, father of young mogul Cameron Johnson, who bagged his first million in high school (see "How To Make A Million Before You Graduate"), says he knew his son was business-minded at age 9, the year he opened a lemonade stand on the front lawn.

Trigger Their Imaginations

"Expose them to possibilities through travel, talking about the environment, talking about the news and things that impact the world, and opportunities that may exist for business from all of that," says Bruce Bachenheimer, director of entrepreneurship at Pace University. Drawing their attention to a few magazine profiles of interesting entrepreneurs wouldn't hurt, either.

Run With It

This advice comes courtesy of Phyllis Cheung, founder of MyWeddingConcierge.com. Cheung's 5-year-old daughter, Olivia, recently asked her mother "if 'they make Frostingcicles'"--that is, Popsicle-shaped frozen treats made with frosting instead of flavored ice. "She said we could call it 'Frosting on a Stick.' The next day we made prototypes." When Olivia asked her dad, Philip, who creates mobile applications for his wife's company, if there might be an app that makes images that kids color, then erase and re-color, he wrote one. "So she understands if you ask about something, it really might be possible," says Mom.

Send Them To Boot Camp

Kids go to summer camp for everything from music to athletics. Why not for entrepreneurship? A growing number of colleges, business-development groups and other organizations sponsor immersion camps for teenagers. Presentation skills, team building and innovation are common subject areas. Often there are simulations. Many camps culminate in business-plan contests or other competitions with prizes such as scholarships. At the summer Teen Entrepreneur Boot Camp in New York City, teens have learned to open temporary retail businesses that they create, design, market and operate, including a real espresso bar open to the public.

Consider Home Schooling

The home-school approach has been known to instill discipline, self-reliance and poised interaction with adults--the very assets needed by any successful young entrepreneur. Aaron Fessler would agree. Fessler was home-schooled in Dayton, Ohio, then started an e-mail servicing firm, Allegro, that he later sold for $40 million. To be sure, interacting with peers in classrooms goes a long way toward ensuring a child's social and emotional development. This is a tricky decision, so do not make it lightly.

Put it All in Context

It's never too early to teach children the importance of entrepreneurship to the world at large. "Show them that they can make a buck but also make the world a better place," says Brad Hancock, director of the Neely Entrepreneurship Center at Texas Christian University. Steer them, for instance, toward Kiva.org, where they can lend some of their profits to other striving entrepreneurs in developing countries.

Charge Interest

Say your daughter wants to start a candy bar retailer out of her school locker and she needs a down stroke of a few hundred dollars to buy inventory. Make sure she understands that capital comes at a cost, and that she has to pay back the benefactor who put her in business. "You're doing your child entrepreneur a disservice if you don't teach them the difference between revenue and profit," says Donna Fenn, author of Upstarts! How GenY Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success. The same goes for any labor you contribute.

Stress Savings

One caveat to the previous slide: When and if the profits start rolling in, don't be afraid to put the brakes on. Alex Rampel's parents were CPAs, so this was Lesson No. 1 for him. "I never had an allowance," says Alex Rampel, chief executive of TrialPay, who started selling his own software at age 10. Mom and Dad suggested that he invest most of his proceeds in certificates of deposit. "That incorporated a strong notion of fiscal responsibility in me," said the 29-year-old Rampel. "That's something most startups could use a lot more of."

Understand the Law

Legal agreements involving minors come with extra complications. Sometimes clients may be wary to trust a young person to follow through on an agreement, or may refuse to work with them at all. "When a minor turns the age of majority [18 in most states] and becomes a legal adult, he has the option to void any contracts he entered as a child," explains Neal Keesee, a Roanoke, Va.-based attorney who has represented minors. Often that loophole will lead clients to request that a parent co-sign contracts to ensure that both parent and child are committed to the agreement.

Shake Hands With the Tax Man

Uncle Sam doesn't card at the door. If your munchkin generates enough income, she'll have to pay taxes on it. "There are no rules that exempt kids from tax laws," says Steven Gargiulo, a Nesconset, N.Y.-based accountant. "The law states that if you make more than $400 in a sole proprietorship, you have to file income taxes." Specifically: a long-form 1040 (not the short form 1040A), a Schedule C for self-employment income and a Schedule SE to account for her self-employment tax.

Never Push Too Hard

Encourage Balance

Most children aren't cut out for business super-stardom. Remember, too, that young passion can ebb as fast as it can swell. One week the lemonade stand has their full attention, the next it's the school play. If their passion dies, so should the business.

Instill Humility

Face it: Kid entrepreneurs are newsworthy. If they meet with success, prepare them for the media attention. A hint: Let them be themselves. Their entrepreneurial spirit is interesting and inspiring enough.